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What's Inside Leading Hedge Funds?

Todd Rosenbluth

S&P Capital IQ analyzes the latest quarterly 13F filings to determine the ten largest hedge funds, managing approximately $200 billion in assets, seeking out what stocks and sectors have been most in and out favor. For some this is an opportunity to see what the “smart money” has been buying and selling.

Third Point bought $1.9 billion of Baxter International (BAX) and now the health care equipment maker comprised 18% of the firm’s portfolio.

While stocks are typically the major positions of hedge funds, managers have long been able to easily participate in certain investment styles via liquid low-cost ETFs. For example, Paulson & Company reduced its stake in SPDR Gold Shares (GLD) by $177 million during the second quarter with the sale of one million shares. In the second quarter, GLD had $976 million in outflows. Despite the sale, Paulson held nine million shares of GLD.

During the second quarter, Tudor Investments bought 1.6 million shares of iShares iBoxx High Yield Corporate Bond (HYG) and 400,000 shares of iShares China Large Cap (FXI).

While some investors may want to use this analysis to spot companies that are in and out favor by hedge fund managers, others may want the benefits and liquidity that ETFs provide.

Global X Guru ETF (GURU), with $240 million in assets, is one of the various ways individuals can invest in stocks held by hedge funds. The ETF is comprise of the top US listed equity positions reported on Form 13F by a select group of hedge funds that the index provider Solactive deems as having moderate turnover rates and concentrated holdings. There are 45 holdings that included a Hologic (HOLX), Time Warner Cable (TWC) and Mondelez (MDLZ).

Another ETF that seeks to track activities of the hedge funds is AlphaClone Alternative Alpha (ALFA 45 NR), which launched in 2012 and has approximately $200 million in assets. AlphaClone’s proprietary “Clone Score” methodology aggregates on a quarterly basis the ideas of hedge funds for which historically it has made the most sense to follow based on their disclosures. Apple (AAPL), which is held by Icahn Capital and other hedge fund managers, is the largest position.